Regardless on one's agency relationship to a buyer, regulators appear consistent in requiring a licensee to demonstrate reasonable care in the discovery and disclosure of latent defects together with disclosure of known defects. The same requirement is also found in the REALTOR® Code of Ethics. In response, either voluntarily or by legislation, a Seller's Property Disclosure is being used across the country.

This article is aimed at identifying disciplines that will help an agent demonstrate due diligence beyond the reasonable expectations of both the customer/client, the regulator and the Code of Ethics.

Most property disclosure forms are filled out at the time of listing or when the seller decides to sell. Then, when an offer comes in, that disclosure is given to the buyer for review. The first thing wrong here is the timing. That disclosure could be aged and working within disclosure requirements anything over two weeks could be old.

The first suggestion is to have the disclosure statement updated commensurate to the date of acceptance of the offer. In the ten plus years that disclosure forms have been around, I have never heard of a seller calling their agent so the disclosure could be amended when a storm has come through and tore off some shingles from the roof.

This update could be as simple as having the seller initial and dating of the seller disclosure. The second thing is to use the seller disclosure as a job description for the home inspector, converting the unknown to a known and verifying the accuracy of the information within the property disclosure statement. This work effort tends to limit the scope of the inspection to material facts, making the inspection very credible. This also is fair to the seller and to a degree, protective of the listing agent. In addition, this distracts inspectors from making arbitrarily inspections of cosmetic items that could or should be addressed elsewhere in the offer.

To a buyer's agent, I am recommending that language be inserted into an offer that would obligate the seller to attach any previous inspection report to the property disclosure statement. This conduct has two profound benefits:

1.) It demonstrates due diligence;
2.) Meets minimum requirement in a contract, that being "good faith".

Now for the issue of payment for the inspection. Whenever practical, I cause the seller to pay for the inspection(s) and have the buyer reimburse that payment at closing. Part of the logic is that if there is a discovery that the buyer can not accept, the inspection fee is unrecoverable. This discipline will protect the buyer and help the seller.

Another issue deals with the concept of earnest money. Some of us will remember the early 80's when sellers were coming to closing with a check as they had little or no equity in the property. In many cases they seller could not close. Today, with the increased expenses of appraisals, inspections and financing the buyer is deserving of some protection when it is the seller who can not perform. Why is this so a big issue? Watch some of the TV commercials that have sports stars encouraging people to borrow up to 130% of value to consolodate debt. I assure some sellers have done just that and are no longer solvent at closing.

In closing, I want to remind you that I am not an attorney, nor am I your broker. Please bring this issue up with your broker/manager. If there is a disagreement with anything I have said here, they are right and I am wrong.

Published: October 14, 1999

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